Dixons Carphone’s mobile business is not agile enough, says GlobalData

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Following today’s release of Dixons Carphone FY figures for 2018/19, Patrick O’Brien, UK retail research director at GlobalData, a leading data and analytics company, comments: ‘‘Dixons Carphone has warned of more pain to come at its loss-making mobile business, leading to its shares crashing 17% in early trading this morning, as it struggles to adapt to a changing market.

“Total UK & Ireland sales fell 2.6% to £6,473m, with the mobile business severely deteriorating in the second half, when it fell 16%, or 8% on a l-f-l basis. CEO Alex Baldock said that the mobile market was changing faster than it had expected and so needs to speed up its response. Things will get worse before they get better, he conceded, with a “significant loss” expected this year, and it will take two years to break even.

“Dixons has renegotiated its contracts with the mobile carriers, closed around 100 stores but it is struggling to deal with changing customer behaviour. Shoppers are upgrading smartphones less frequently as they can only see marginal improvements in new generations. Slightly better camera functions and slightly faster processors are no longer deemed enough to sign up for another expensive two-year contract, and now the midmarket is filling up with much better value options which more shoppers are buying outright on a sim-free basis. Such purchases are more likely to be made online, and so more likely to bypass the independent advice-based approach of Carphone Warehouse.

“While it boasted of increasing market share in electrical in all its territories, UK & Ireland like-for-like growth of 1% compares unfavourably with AO.com’s 5.7% growth, though it is likely to be taking some share from John Lewis, whose electrical business has been struggling.

“Baldock joined Dixons in March 2018. In his early months he substantially lowered profit expectations in a clearing-the-desks exercise, heavily criticised his predecessor and slated the lack of integration of the Carphone Warehouse merger. He also had a data breach to contend with (which occurred before his tenure). While he quickly identified the problems of the mobile business, there is a question mark around the company’s ability to adapt quickly enough, and despite the closures in the last year, its portfolio of over 1,000 stores in the UK looks way too heavy. Baldock may have to take further action here, which would be costly.”